The New Directions of LTCI
(written for Agent Sales Journal, January 2010 issue)
Research from McKinsey & Co. finds that the average American family will face a savings gap of $250,000 at the time of retirement. Even with payments from Social Security and pensions, as well as personal savings in 401(k) and other retirement plans, the average family will have only about two-thirds of the income it will need.1
What’s the greatest risk in your financial plan? We’ve seen how a stock market crash can devastate retirement plans. But the greatest risk is not the longevity of this bear market, or even another bear market. It’s the devastating cost of long-term care.2
With quotes like these, how can anyone believe that long‐term care insurance is a luxury, not a necessity? Yet market penetration for LTCI still hovers under 10% in the face of 80 million baby boomers starting to turn 65 next year! Having been in this market for 22 years, I do wish the objections would change – at least that would make it much more interesting and yet they stay the same.
The LTC insurance industry has allowed people to tell us that:
•they don’t want long‐term care insurance because they are never going to a nursing home (instead of us telling them this can be the only thing that keeps people out of nursing homes by providing money to hire help at home); or
•they are going to self‐insure without input from us about the true cost of doing that by calculating care at future costs and the lost investment opportunity of pulling those funds out, particularly if it is bad time to do so; or
•they’re too young without us explaining they will pay more for coverage the longer they wait because they will have to buy a larger benefit due to inflation and that there’s a good chance they won’t be able to qualify medically for a plan if they wait; or
•they can’t afford the premium because it is a bad economy instead of us telling them they simply cannot afford to not protect their retirement with LTCI.
I continue to believe that long‐term care is the REAL health care crisis in America and we only have a few years to get it to the masses in time to make a difference. Here are three ways it can be done:
1) Worksite LTCI: In mid 2010, 51% of the long‐term care insurance policies were bought at work.3 That’s a combination of true group and multi‐life, but multi‐life is driving the bus with a growth rate of 47% from 2007 to 2008. Network with employee benefit specialists to break into this market. Since most employees are now going through LTC with a family member, they are hungry for the great news that there is a way their own children don’t have to go through it with them. And amazingly, most employees aren’t complaining about the economy. They are just appreciative that their employer cared enough to make LTCI available. The secret to participation rates of 20% or more is a 6‐8 week pre‐education program that gets the employees to the employee meetings, then offering personal consultations for employees and family members after the meetings.
2) Partnership LTCI: Using the Partnership as an additional incentive will increase worksite LTCI sales. Network with other professionals to increase individual sales by doing retirement planning town hall meetings in your area and working in the Partnership message that families can protect assets and avoid estate recovery. Titles like “Don’t Bet the Farm – Is Your Family Protected?” are effective in rural areas as many families have no clue that a farm that has been in the family for generations can be jeopardized by estate recovery.
3) Combo Annuity/LTC products: Now Americans can exchange older non‐qualified annuities for these combo products and pull the gain out tax‐free for qualified long‐term care expenses.
Scared? Someone said once that courage is just fear that has said its prayers.
1 TIAA‐Cref Press Release, “The Current State of Americans’ Retirement Plans”, January 8, 2010); 2 Savage, Terry. Chicago Sun‐Times Financial Columnist, author of “The New Savage Number: How Much Money Do You Need To Retire?” John Wiley & Sons, 2009, p. 218; 3 “Multi‐Life in the Large Group Market”, Session 09‐19, 9th Annual ILTCI Conference, Reno, NV, 3/30/09